ESTABLISHING A SMALL SCALE INDUSTRY FOR MANUFACTURING OF PIPE PVC Pipe.doc (Size: 171.5 KB / Downloads: 1456)
A TECHNO ECONOMIC FEASIBILITY PROJECT REPORT ON ESTABLISHING A SMALL SCALE INDUSTRY FOR MANUFACTURING OF PIPE (PVC)
HARYANA COLLEGE OF TECHNOLOGY & MANAGEMENT,
CHAPTER 1: INTRODUCTION
1.1 INTRODUCTION TO SSI: The SSI (Small Scale Industry) today is immense for the growth of the country. Small scale industries are the industries which are run with the help of hired labour and which also use some simple machine and power. The investment scale in this industry varies from 5 lakhs to 1 crore for the fixed assets. Irrespective to number of workers engaged is called small cale unit.
In India these type of industries are promoted to meet with the problems of excess population and unemployment so the government of India promotes entrepreneur to step up small scale industries by aiding him by giving loans, subsidiaries, land, guidance etc. The strategy adopted by the government is:
1. Public entrepreneurship should remain confirmed only to those industries and sectors where private enterprise, individual or corporate, is generally not attracted, Existing public entrepreneurship be improved through better management and by putting relatively greater emphasis on research and development. There is need to streamline the R & D wing of public sector enterprises.
2. All possible efforts be made very seriously (not casually) for the development of an industrial culture. It should be realized that the central core of entrepreneurship is the motive force since by its very nature, entrepreneurship implies positive action and initiative, motivated individuals with the right kind of combination of abilities and attributes can pursuer their goal with unremitting courage and enthusiasm.
3. There is need to develop management education and industrial training.
4. The development of backward regions/areas constitutes a new challenge. Programs for their development be drawn up and should be effectively implemented.
5. Adequate measures are a must for mobilizing and fostering the entrepreneurial talent in the country. In this context, it should be realized that entrepreneurs are not the gift of a particular class.
6. Economic administration by the sate should be improved and made more effective so that economic policies may fully achieve their objectives in the overall interest of the economy.
7. Financial institutions should provide adequate and timely credit and technical assistance, especially to the small and medium sized enterprises. They may also impart knowledge about the needs of the economy and they should file their massive data in terms of growth of new entrants or entrepreneurs in the field of industry.
1.2 PROCEDURE TO START A SMALL SCALE INDUSTRY: Starting of small scale industries is not a very easy task. at the same time it is not difficult so, if different factors are considered before taking a decision to start it. For starting, the first and most important work is to select a suitable sit and then to make a proper scheme and yet approve.
Procedure to start small scale industry consist of following important steps-
1.2.1 GETTING STARTED: An entrepreneur desiring to set up an industry must first formulate comprehensive setting the industry for its success. For this, he should be confident, enthusiastic and realizing. He should therefore make himself familiar with the permanent policies and procedures, assistants and facilities he can get from whom and how.
1.2.2 SELECTION OF INDUSTRY: Selection of a suitable place for an industry is the key to success. Different factors for the selection of the site are availability of the land, labor, raw material, power and transport facilities and nearness to the market. Type and size of industry should be decided by the market study, quality and price of other product with which proposed item be in competition. Demand and supply of position of the product should be before selecting the type of industry. Owner should make himself conversant with all acts, rules of central and state governments etc.
1.2.3 PREPARATION OF SCHEME: After deciding the product to be manufactured and the place of industry , a detailed scheme is prepared .this scheme include number of machines ,their approximate cost, requirements of land and building ,number of workers and other staff ,their salaries and estimated production cost ,expected profit, proposed factory layout and plant layout.
1.3 SOME FACTS ABOUT SSI:
Â¢ Small scale industry provides employment. SSI Sector in India creates largest employment opportunities for the Indian population. It has been estimated from the research that in the year 1998-1999 the employment provided by the small scale industry was 171.58 lakh. However for the six years the graph is shown as below:
Â¢ Small Scale Industry increases production level in country. The small scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive. Form the following graph this can be understood.
Thus the above graph shows production from the small-scale sector from the year 1993-94 to year 1998-99. The graph shows that there is rapid growth in production from the year 1993 to 1999.
Â¢ The export from SSI sector has been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garment, leather and jewellery units from this sector. The lucrative product groups where the SSI sector dominates in exports are sports goods, readymade garments, woolen garments and knitwear, plastic products, processed food and leather products.
CHAPTER 2: ENTREPRENEUR
Entrepreneur is the owner of the business who contributes the capital and bears the risk of uncertainties in business life. He organizes, manages, assumes the risks and takes the decision about the enterprise. He takes all the steps to establish undertaking, coordinates the various factors of production, and gives it a start. He should be able to evaluate, business, opportunities, together all the necessary resources and ensures the success of the enterprise.
2.1 CLASSIFICATION OF ENTREPRENEUR: Entrepreneur views are broadly classified into three groups:
Â¢ Risk bearer
2.1.1 ENTREPRENEUR AS A RISK BEARER: According to Richard Cotillion, a rich man living in France, was the first who introduced the term entrepreneur as an agent who buys the factory production at certain price in order to combine them into product with a view to selling it at certain price. He illustrated the framer who pays out contractual income, which is certain to landlord, labour and sells at price that is uncertain. Thus they too are risk bearer agent of production. Uncertainty is defined as the risk which cannot be insure against and incalculable.
2.1.2 ENETREPREPNUER AS AN ORGANIZER: According to Jean-Baptize, Entrepreneur is a function of co-ordination, organization and supervision. According to him, an Entrepreneur is one who combines the land of one, the labor of another, capital of one another and thus produces product. By selling the product in the market he pays interest in capital, rent on land, wages to labor and what remains in his profit.
2.1.3 ENTREPREUER AS AN INNOVATOR: According to Joseph who has introduced new combination of factors of production. He said, it may occur in any one of the following five forms:
1. The introductions of new product in market.
2. The instituting of new production technique, which is not yet tested by experience in the branch of manufacture concern.
3. The opening of new market into which the specific product has not previously entered.
4. The discovery of new source of supply of raw material.
5. The carry input of new form of organization of any industry by creating of monopoly position or breaking up of it.
2.2 CHARACTERISTICS OF AN ENTREPRENEUR: An entrepreneur should have following characteristics:
Â¢ Desire of high achievement.
Â¢ Hardworking, willingness
Â¢ Highly optimistic
Â¢ Good organizer
Â¢ Resourceful and should be able to take initiative.
2.3 FUNCTIONS OF ENTREPRENEUR: The function of an entrepreneur is as following:
Â¢ Idea generation
Â¢ Determination of business objectives
Â¢ Product analysis and market research
Â¢ Determination of form of ownership of organization
Â¢ completion of promotion facilities
Â¢ Raising the necessary funds
Â¢ Proper use of machine and material
Â¢ Recruitment of men.
CHAPTER 3: FINANCIAL REQUIREMENT
Since Independence Government of India has been giving all possible encouragement of SSI. A number of organizations have been set up by the Government of India to provide assistance and incentive to small scale industries. These packages of assistance are provided to SSI by a large number of organizations operating at national and State Level. Development programs are being carried out at two levels:
1. National level
2. State level
Agencies, which work at National Level, are: -
Â¢ Small Scale Industrial Board (SSIB)
Â¢ Small Scale Industries Development Organization
Â¢ National Small Scale Industries Corporation
Agencies which work at State Level are:-
Â¢ State Directorate of Industries
Â¢ District Industrial Centre (DIC)
Â¢ State Small Industrial Corporations (SSIC)
Â¢ State Financial Corporations
Â¢ Commercial Banks
Â¢ Small Industries Development Bank of India (SIDO)
3.1 DEVELOPMENT PROGRAMMES AT NATIONAL LEVEL
3.1.1 SMALL SCALE INDUSTRIAL BOARD (SSIB): It is all advisory body and comprises State Government Ministers Offices and representatives of several Institutions and associations. Its functioning is to plan, advice and coordinate the activities of Central and State Government. As such it does not render direct help to entrepreneurs. However, it helps the Government in involving new policy and programme for small scale sector.
3.1.2 SMALL SCALE INDUSTRIES DEVELOPMENT ORGANIZATION (SSIDO): Its Headquarter Nirman Bhawan, New Delhi headed by the Development Commissioner (SSI) has a network of Small Industries Service Institute (SSIs) one in each State which helps in economical, technical, industrial information service, management consultancy services, training and marketing etc.
3.1.3 NATIONAL SMALL SCALE INDUSTRIES CORPORATION (NSSIC): Its headquarters at New Delhi and Regional Offices at Kolkata, Mumbai, Chennai, Guwahati etc.
Â¢ FACILITIES PROVIDED:
1. Supply of machines and equipment on hire purchase
2. Distribution of scare raw material imported components.
3. Marketing assistance
4. Assistance to SSI in securing orders for railway and defense
5. Operating a credit guarantee scheme for those units which are registered within.
3.2 DEVELOPMENT PROGRAMMES AT STATE LEVEL
3.2.1 STATE FINANCIAL CORPORATIONS: Almost every state has its own financial corporation to provide machines and long term loans to small and medium scale industries. Amount of loan varies from Rs. 5,000 to Rs. 6,00,000 and these loans are repayable in equal installments spread Over a period of 10-12 years. Important schemes of financing SFC are
1. A loan scheme for financing of village and cottage industries, under this scheme they are financed to the extent of Rs. 25,000 and the interest rate is very low.
2. Assistance to tiny units-these grant assistance up to Rs. 2.00 lakhs.
3. Scheme for technical entrepreneur-in order to encourage self employment these corporations provide financial assistance up to Rs. 2.00 lakhs at very low interest rate to such technical entrepreneurs who have acquired a diploma or degree in any discipline of engineering.
4. Loans to hotel industry.
5. Scheme for SC/ST-Grant financial assistance to SC/ST entrepreneurs at a nominal margin such rates are charged at the rate of 10%
6. Scheme for physically handicapped-these provide financial assistance up to Rs.3.oo lakhs at a rate of 10%.
3.2.2 COMMERCIAL BANKS: SBI and its subsidiary banks and other Nationalized banks provide liberal term loans and working capital to small scale entrepreneurs and these loans are advanced for purchase of machine and material and to the technical entrepreneurs to encourage self employment.
Specialized institutes like-Central Institute of Tool Design. Hyderabad, Central Tool Room, Ludhiana and Kolkata, Central institute of Hand Tools Jalandhar, Institute for Design of Electrical Measuring Instruments (IDEMI) Mumbai, Integrated Trading center, Nilokheri, National Institute of Small Extension, Hyderabad and National Institute for Entrepreneurship and Small Business Development. They conduct special courses, programmes, workshops, training programmes for the benefit of small scale industries.
3.3 CREDIT SUPPORT: Credit is the prime input for sustained growth of small scale sector and its availability continued to be a matter of concern. To provide credit support to the various SSI units various policies have been formulated by the GOI. Various institutes like SFC, SIDC, NISC, and SIDBI are providing financial support to various SSI units.
OVERVIEW OF THE STEPS TAKEN BY THE GOI IS:-
1) Composite loans limit raised from Rs. 10 Lakhs.
2) In the National equity fund scheme (NEF) the project cost limit has been raised from RS. 25 lakhs to RS. 50 Lakhs.
3) Soft loan limit restrained to 25% of the project cost.
4) Task Force is appointed by the Department of Economic Affairs to suggest revitalization/restructuring of the State Financial Corporation.
CHAPTER 4: MARKETING
4.1 CONCEPT OF MARKETING: Studies reveal that different organizations have different perceptions of marketing and these different perceptions have led to the promotion of different concepts of marketing. It is found that at least four distinct concepts of marketing have guided and are still guiding terms. They are:
Â¢ Exchange concept
Â¢ Production concept
Â¢ Product concept
Â¢ Sales concept
We will discuss these concepts in detail as below:
4.1.1 EXCHANGE CONCEPT: The exchange concept of marketing as the name indicates holds that the exchange of a product between the seller and buyer is a central idea of marketing. But a proper serutiny of the marketing would readily reveal that marketing is very much broader than exchange. The other important aspect of marketing such as concern for the customer, the generation of the venue satisfaction, the creative selling and integrated action for serving the customer get completely overshadowed in this concept of marketing.
4.1.2 PRODUCTION CONCEPT: According to the production concept marketing is a merely related to production. They believe that marketing can be managed by managing production. The concept holds that consumers would as a rule support these products that are produced in a great volume and allow unit cost organization voting for this concept are influenced by a drive to produce all that they can. They do achieve high production efficiency and a substantial reduction in the unit cost of production. Yet they often do not get customers as they expected. Customers after all are motivated by a variety of considerations in their purchases. Easy availability and low cost are not the only parameters governing the customers buying action and the production concept thus fails to drive as the right marketing policy for the enterprise.
4.1.3 PRODUCT CONCEPT: The product concept is somewhat stiff form the production concept whereas the production concept seeks to win markers and profits v/a high volume of production and low unit cost of production. The product concept seeks to achieve the same result via product excellence, improved products, new products and ideally designed and engineering products. It also places emphasis on quality assurance. Organizations that subscribe to the product concept of marketing believe that consumer goods automatically vote for products of high quality they spent considerable energy. Time and money on research and development brings in a variety of new products. They do not bother to study the market and the consumer in depth. They get totally embraced with the product and almost forget the consumer for whom the product is actually meant. They fail to find what the consumers actually need and what they would gladly accept.
4.1.4 SALES CONCEPT: The sales concept maintains that a company cannot except its products to get picked up automatically by the customers. The company has to consciously promote and push its products heavy advertising, high power personnel selling, large scale sales promotion, heavy price discounts and strong publicity and public relations are the normal tools used by the organization that rely on this concept. Evidently the sales concept too generates marketing myopia just as a exchange concept, production concept and product concept. It leads to a wrong or inadequate understanding of the market and consequently a total failure in the market place.
4.2 IMPORTANCE OF MARKETING TO THE SOCIETY:
1. Marketing helps to achieve, maintain and raise the standard of living marketing brings new variety of useful and quality goods to the consumer and better marketing gives soon for mass production.
2. Marketing increase employment opportunities.
3. Marketing helps to increase national income.
4. Marketing is a connecting link between the consumer and the producer.
5. Marketing helps to maintain economic stability. Economic stability is the sign of any efficient and dynamic economy and economic stability is maintained only when there is a balance in supply and demand. If production is more than demand the access goods cannot be sold at acceptable prices than the stocks of goods would be picked up and there would be glut all the market resulting fall in price. Similarly, if production is less than demand prices will shoot up resulting in higher prices. In such a situation marketing maintains the economic stability by balancing production and consumption.
4.3 STEPS IN MARKETING MANAGEMENT
1. Product Planning
2. Sales Forecasting
3. Pricing Policy
4. Distribution Strategy
5. Role of Advertising (Personnel Selling)
We will discuss now in details as below:
4.3.1 PRODUCT PLANNING: Product planning may be defined as the act of marketing out and supervising the search. Screening, development and commercialization of new products, modification of existing lines.
Product planning involves three important considerations:-
1. The development and introduction of new ideas
2. The modification of exiting lines as may be required in terms of changing consumerâ„¢s need and preferences.
3. The discontinuance of elimination of marginal or unprofitable products.
4.3.2 SALES FORECAST:- A sales forecast is an estimate for the amount or unit sales for a specified future period under a proposed marketing plan or programme. As defined by the American Marketing Association it is an estimate of sales in physical units for a specified future period under a proposed marketing plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.
Marketing Of A Proper Sales Forecast Requires An Assessment Of:
1) The outside uncontrollable force likely to influence the company sales.
2) The internal proposed changes in the marketing strategies and tactics of the company which are likely to affect the sales.
Sales forecast can be for a specified product line or it can be for a market as a whole or for any portion of it.
According to the time period, the sales forecast can be divided under three types:
1. SHORT RUN FORECAST:-Which generally extends from a few weeks to about six months or at most one year in future. This is mostly done by companies as day-to-day forecasts for their production control needs and to plan for long term financial needs.
2. MEDIUM RANGE FORECAST:- Which extends from one year to about four years into future. This type of forecasting is important for
a) Estimating profits, budgeting expenses etc,
b) Determining dividend policy
c) Deciding rate of maintenance expenditure
d) Determining schedule of operations.
3. LONG RANGE FORECAST:-extending to at least five years into future and in case we of really large organizations are extending over a longer period up to ten years or even more.
It is useful in the following ways:-
1) Anticipating the magnitude and timing of capital expenditures required for new facilities in the future.
2) Determining probable trends and range of cash inflows from sales.
3) Estimating companies long range personnel needs.
4) Highlighting future problems.
4.3.3 PRICING POLICY: - Pricing is a very critical decision. Pricing decisions are not easy to make. Hence sound pricing policies must be adopted to ensure that the organization secures satisfactory profits. For pricing decisions a marketing manager has to be familiar with economic concepts useful decisions. He has to consider various pricing factors which influence pricing apart from costs such as the customers characteristics, the economic product characteristics, competitive environment and Governmental control wherever applicable. The price of the product materially affects the demand for it as well as the organization competitive ability for expenditure if the quality of the product is to be improved this may be possible only if the customers are willing to pay a higher price for it. Besides, if the product is not properly priced there might be reluctance from the channels of distribution.
4.3.4 DISTRIBUTION STRATEGY: Distribution may be defined as an operation or a series of operation, which physically bring goods manufactured or produced by only particular manufacturers into the hands of the final consumers to the users.
A distribution strategy consists of distributing or sub-dividing the total products of a manufacturer on a geographical basis to various specific markets. There may be a state market, a National Market or even a world wide market for the production while defining a strategy we have to deal with two aspects. First, is the organizational aspects, it is concerned with how and through what channels we should distribute. For this general marketing policy is responsible for deciding the various channels we should distribute. For this general marketing policy is responsible for deciding the various channels for distribution. Secondly, is the operational aspect of distribution or the physical distribution, it is concerned with moving of goods from one place to another, including the warehousing storage and transportation costs as well includes.
4.3.5 ADVERTISING: To counter the markets at National and International level the GOI set up various institutes like:-
1) Export Credit Guarantee Corporation Ltd. (ECGC)
2) State Trading Corporation. (STC)
3) Trade Development Authority.
4) National small Industries Corporation.(NSIC)
CHAPTER 5: ORGANIZATION
5.1 ORGANIZATIONAL STRUCTURE OF SSI: There are 28 SISIs and 30 Branch SISIs set up in State Capital and other industrial cities all over the country. The main activities of these institutions are as follows:-
1) Assistance/consultancy of prospective entrepreneurs.
2) Project profiles.
3) Entrepreneurship development programmes.
4) Production index.
5) Management development programmes.
6) Energy conservation
7) Quality control and up gradation.
8) Export promotion.
9) Market surveys
10) Intensive technical assistance.
5.2 ORGANIZATIONS UNDER SSI: - The following organizations come under the small scale industry:
1) Regional Testing Centers (RTCs)
2) Field Testing Stations (FTSs)
3) Tool Rooms/Tool Design Industries (TRs/TDs)
4) Training institutes:
Â¢ National Institute of Small Industry Extension Training (NISIET)
Â¢ National Institute for Entrepreneurship and Small Business Development (NIESBUD), New Delhi.
Â¢ Integrated Training Center (Industries), Nilokheri (Haryana)
5) Product-cum-Process Development Centers (PPDCs)
Six centers are in existence. These are:-
Â¢ Firozpur for glass industry.
Â¢ Kannauj for essential oils.
Â¢ Meerut for sports goods and leisures time equipments.
Â¢ Agra for foundry and forgings
Â¢ Ramnagar for electronic industries
Â¢ Mumbai for electrical measuring instruments
The main motive of these centers is to upgrade the technology of the manufacturer and help in energy conservation.
5.3 TRAINING INSTITUTE: All the training institutes mentioned above are autonomous body and an autonomous body and are under the administrative control of the office of DC (SSI). Their objective is to identify and motivate traditional/ non-traditional entrepreneurs and to provide training at the national and international level. These institutes provide training by imparting seminar and workshop on topical issues. The integrated training center (industry), nilokheri is only institute that impart training to the junior field staff i.e. investigator / SIPOs to expose to and educate them in the programmes and policies of development and promotion of small industries. At present its training consists of courses like
1) Rewarding of electric motors and house wiring.
2) Repairs to diesel engine and agricultural water pumps.
3) Servicing and repair to automobiles (cars and scooters).
CHAPTER 6: ABOUT PRODUCT
6.1 LOCATION OF UNIT : Durga Pipe Limited
Shergarh Road Kaithal
: HARYANA, INDIA
6.2 NAME OF PRODUCT : Pipe (PVC)
6.3 MANUFACTURING PROCESS: For manufacturing pipe first we make a mixture of different material. These materials are PVC resin, calcium chloride, wax, CS, citric acid, oil. After proper mixing, mixture goes into machine in which firstly heating & then cooling takes place. Then cooled mixture comes into extrude machine where formation of pipe varying size depending upon the requirement takes place. Then pipe passes through the Alof machine &after that it passes through the marking m/c. Finally pipe goes to cutter & weight counter. In this way pipe is manufacture.
6.4 FLOW PROCESS CHART:
6.5 SPECIFICATIONS: Pipe has available in different size like 2, 2.5, 3, 4, 5.
6.6 CUSTOMERS: Pipe is generally used domestically as well as for agriculture purpose.
6.7 REGION WHERE THE PRODUCT IS SOLD: Mainly local areas of Ambala and in other areas of Haryana like Kurukshetra, Kaithal, Karnal, Yamuna Nagar, Panchkula, etc. It is also supplied in some other states.
6.8 STAFF REQURIEMENT AND EXPENDITURE:
Supervisor (1) : 7000 /-
Skilled labour (2) : 12,000 /-
Unskilled labour (5) : 15,000 /-
Security (1) : 2,000 /-
Total : 36,000 /-
So the expenditure incurred on staff is Rs. 36,000.
6.9 COST INCURRED ON MANUFACTURING PER MACHINE:
MATERIAL COST IN RUPEES PER KG
PVC RESIN 54 /-
CELSIUM CHLORIDE 10 /-
WAX 35 /-
CS 42 /-
CITRIC ACID 40 /-
ONE PACK 64 /-
OIL 51 /-
Total 296 /-
Thus the cost incurred on manufacturing per washing machine is Rs. 296.
6.10 COST INCURRED, SELLING PRICE & MARGIN PER:
Cost incurred : 296 /-
Selling price : 310 /-
Margin : 14.0 /-
6.11 FIXED ASSETS:
Mixing machines (2) : 50,000 /-
Extrusion machine (2) : 4, 00,000 /-
Dyes (10) : 20,000 /-
Gen. & Compressor : 40,000 /-
Others (fax m/c, computer) : 2,000 /-
Total : 5,12,000 /-
So from the above it cleared that the amount of fixed cost is Rs. 5,12,000 /-
6.12 NET PROFIT CALCULATION PER ANNUM:
Rent of building : 1,20000/-
Staff wages : 2,00000/-
Electricity : 2,00000/-
Advertisement : 2,0000/-
Overhead : 50,000/-
(Transport & repair etc.)
Others : 20,000/-
TOTAL : 6,10000/-
Thus the annual expenditure comes out to be Rs.6,10000/-
24 Hours : 2000 KG
Per Month : 60000 KG
Per Anum : 720000 KG
RETURN FROM SALE = Annual production * Manufacturing cost per piece
= 720000 * 14.0 = 1440000/-
PROFIT = Return from sale - Annual Expenditure
= 1440000 - 610000
= Rs. 8,30000/-
Thus the profit from all the calculations comes out to be Rs. 8,30000/-
6.13 BREAK EVEN POINT:
Brake Even Point = Fixed cost/Sale Price â€œ variable cost
Fixed cost = Rs. 5,12000/-
Profit = Rs. 8,30000/-
B.E.P. = 512000/310 â€œ 296 = 1355.6